Microsoft Intensifies Focus On White-Hot Hybrid Cloud Market With First Acquisition Of 2018

(Note: After an award-winning career in the media business covering the tech industry, Bob Evans was VP of Strategic Communications at SAP in 2011, and Chief Communications Officer at Oracle from 2012 to 2016. He now runs his own firm, Evans Strategic Communications LLC.)

CLOUD WARS — As Microsoft’s cloud revenue rapidly approaches $20 billion, hybrid cloud has become the centerpiece of Microsoft’s strategy because of its unique ability to help business customers exploit their huge legacy IT investments while simultaneously moving as aggressively as possible to the cloud.

And last week’s acquisition of high-performance-storage vendor Avere Systems underscores that hybrid focus as Avere’s primary value is helping large enterprises deploy not only storage but also compute resources across multiple data centers, remote offices, public clouds and private clouds.

While the Avere acquisition makes a great deal of sense in terms of an opportunity for Microsoft to bolster Azure’s large and rapidly growing set of enterprise-strength capabilities, it also must be viewed in the larger context of Microsoft’s ongoing belief that the enterprise cloud must be viewed as a hybrid cloud: an extension of and enhancement tocustomers’ existing IT assets, rather than a rip-and-replace revolution.

To put that perspective in greater context, I’ll first offer a focused comment from Microsoft on why it’s so bullish on the Avere acquisition, and then I’ll share some high-level views from Microsoft leaders, including CEO Satya Nadella, on their belief that they hybrid cloud is the true cloud.

“The cloud is providing the foundation for the digital economy, changing how organizations produce, market and monetize their products and services,” wrote Zander, describing Avere as “a leading provider of high-performance NFS and SMB file-based storage for Linux and Windows clients running in cloud, hybrid and on-premises” environments.

“Whether it’s building animations and special effects for the next blockbuster movie or discovering new treatments for life-threatening diseases, the need for high-performance storage and the flexibility to store and process data where it makes the most sense for the business is critically important,” Zander said.

That flexibility across existing and new environments is one of the major strengths of the so-called “legacy” cloud providers—Microsoft, IBM, SAP, Oracle—because they have decades of experience and expertise in understanding and dealing with the wildly complex IT estates that big corporations have cobbled together over the past 30 or 40 years.

And those companies know full well that while their customers understand and want to embrace the business and technological and economic advantages of the cloud, that transition will take 5 or 10 or 20 years—and even then, lots of on-premises systems will still be up and running for a variety of reasons (regulatory, performance, security, etc.).

“We don’t think of our servers as distinct from our cloud,” Nadella said on an earnings call earlier this year. “In other words, this intelligent cloud and the intelligent edge is the architectural pattern for which we are building. Whether it’s SQL Server 2017 or it’s Windows Server, or the container service, everything that we do assumes the distributed computing will actually remain distributed.

“And it turns out that it’s helpful to think about it that way, both for customers who are rationalizing their portfolios of apps that the lift-shift modernizes to what they run in their data centers, or in our data centers, but also forward-looking new workloads.”

Executive VP Guthrie expanded on that vision in a blog post summarizing his keynote talk. In that post, he pushed hard on the power and value of the hybrid cloud, and why Microsoft believes it will be the defining IT strategy for most businesses and is continuing to evolve Azure’s capabilities to fit that model:

“While the vast majority of organizations have moved to a cloud-first technology strategy, most are still early on realizing this strategy due to a number of aspects from technology complexity to evolving regulations. Over the past year, the Microsoft Azure team has explicitly focused on removing all barriers for enterprise customers, so that even the most complex technology and policy requirements are uniquely met with Azure.”

“We uniquely understand that a distributed hybrid cloud model is the durable cloud model. And, we uniquely understand that hybrid cloud is more than just infrastructure – it must address your entire environment.”

“Enabling consistent development across cloud and on-premises, Azure Stack integrated systems are now shipping and available for purchase – with Dell EMC, Lenovo, and Hewlett Packard Enterprise (HPE) showcasing their solutions here at Microsoft Ignite. Now developers can build one application and have it run in Azure and Azure Stack, opening up new uses cases such as edge and disconnected solutions and meeting literally every regulatory requirement.”

“Additionally, we’re also making it increasingly cost effective to run SQL Server and Windows Server on Azure. Taking advantage of Azure Hybrid Benefits, customers can gain up to 50% reduction in licensing costs. Combined with the no-code changes with Azure Database Migration Service, it’s clear that Azure is THE most cost-effective cloud to run your Windows Server and SQL Server applications. While other cloud vendors talk about hybrid as purely infrastructure, or even as simply hosting legacy virtualization infrastructure in public cloud, we know this is not sufficient. Only Microsoft offers the comprehensive, consistent, hybrid cloud to address the real-world needs of enterprise customers today and into the future.”

Guthrie also took a direct shot at Amazon’s ability to migrate on-premises workloads to AWS, calling Amazon’s prices for such work “unreasonable” and claiming Microsoft could deliver the same results while charging the customer 70% less:

“Frequently, the most important, but also most complex, aspect of any application is the data. And, dealing with data in a hybrid application or full cloud migration situation can be prohibitively expensive,” Guthrie wrote.

“I was recently reviewing a statement of work for an enterprise organization to migrate their 1,000+ SQL Server-based applications to AWS. The cost to modify each of these applications, so they could move to AWS, was over $20 million US. That’s unreasonable,” wrote Guthrie.

“We’ve built a fully managed Azure SQL Database service, now with 100 percent SQL Server compatibility for no code changes via managed instance, and are introducing a new Azure Database Migration Service that enables a near-zero downtime migration. The customer facing a $20 million migration to AWS can migrate all of their application data to Azure” for 70 percent less than what Amazon was charging, Guthrie said.

The upshot here is Microsoft’s unwavering belief that cloud-only approaches to the enterprise cannot and will not offer long-term benefits and value to corporate customers—and in the Cloud Wars, this will be a major strategic differentiator for Microsoft.

A couple of final thoughts on Microsoft’s hybrid strategy come from Mark Jewett, director of product marketing for Microsoft’s cloud platform. These excerpts are from a recent blog post written by Jewett called Your future cloud is hybrid, and so is Azure:

“We asked 2,500 IT professionals about their approach to cloud, and 91 percent of these IT workers believe hybrid cloud will remain the approach for their organizations five years from now.”

“Hybrid is essential in a world of AI and IoT as we move towards an Intelligent Cloud and Intelligent Edge working together. A distributed hybrid cloud enables a future-proof, long-term approach – which is exactly why we see it playing a central role in cloud strategies for the foreseeable future.”

“Hybrid is the future of cloud. One of the most promising things about cloud is the application innovation that new approaches like containers, microservices, serverless, and platform-as-a-service enable. The arrival of Azure Stack, just one of our many solutions to help advance hybrid scenarios, is an absolute game-changer. It enables a consistent development experience for cloud-native and traditional applications, with the flexibility to deploy in the cloud, on-premises, or at the edge.”

“The consistency of our hybrid approach is exactly why customers find it appealing. When we say consistency, we do mean consistency across data, management, identity, and security. Customers must secure and manage their data and users across both the cloud and on-premises, and not having multiple systems helps reduce complexity.”

To all of you business customers out there evaluating various cloud vendors: how robust and comprehensive is their hybrid strategy? Since you’re the ultimate prize in the Cloud Wars, make sure those strategies are based on what’s right for your business, rather than on what cloud offerings they happen to have.

As businesses jump to the cloud to accelerate innovation and engage more intimately with customers, my Cloud Wars series analyze the major cloud vendors from the perspective of business customers.